Haifa-born economist to head Brazil central bank
BRASILIA (Reuters) – Brazil’s central bank will probably keep interest rates at their highest in nearly 10 years, a Reuters poll showed, at what is set to be the last meeting before appointed chief Ilan Goldfajn takes over to start what may be a long cycle of rate cuts.
All 43 economists surveyed expect the central bank’s policy committee to hold its benchmark rate at 14.25 percent on Wednesday for a seventh straight meeting.
The central bank was included in a broad cabinet reshuffle by interim President Michel Temer, who took office last month from suspended President Dilma Rousseff with a pledge to restore market confidence and end one of the worst economic crises in Brazil’s turbulent history.
Goldfajn’s appointment needs to be endorsed by the Senate. Although Temer has the majority support he needs, the vote is unlikely to happen in time for the new central bank president to take part in this week’s policy meeting.
“We do not expect any significant modifications in the Monetary Policy Committee statement, given the ongoing change in the bank’s board,” wrote David Beker and Ana Madeira, economists with Bank of America Merrill Lynch.
Goldfajn, 50, was born in Haifa and raised in Rio de Janeiro. He is an active member of the Brazilian Jewish community and was educated in Rio’s Liessin Jewish day school. He is fluent in Hebrew, English, Portuguese and Spanish, and has a doctorate from the Massachusetts Institute of Technology. In the mid-1990s he was a professor at Brandeis University, followed by a stint as an economist at the International Monetary Fund.
In a meeting held by the Brazil-Israel Chamber of Commerce last month, Goldfajn said “Brazil has a lot to learn from Israel.”
The graduate of MIT who headed the economic research department of Itau, Brazil’s largest private sector bank, will replace Alexandre Tombini, who was criticized by many investors for slashing rates to record lows in 2012 despite stubbornly high inflation.
Goldfajn’s first months as central bank chief will probably be marked by interest rate cuts. Only three of the 35 economists who gave forecasts for the rest of the year did not predict reductions, which could bring the benchmark rate to 13.00 % by December, according to the median poll forecast.
Rate cuts could offer a much-needed relief for Brazil’s beleaguered economy and many companies that are struggling to service their debt. The recession has lowered inflation, which is still twice the official target of 4.5% but widely expected to fall this year and next.
The main question among economists is, how extensive cuts should be. Forecasts for interest rates at the end of 2017 ranged from 9.0% to 12.50%.
“Once it starts cutting, the bank is likely to cut a lot,” Marcelo Carvalho, head of Latin America economic research at BNP Paribas, said in a note.
JTA contributed to this report.